"Looking at the inter−state data for credit flow, I find that banks in Karnataka are acting extremely cautious with negative growth or under−achievements in case of loans to weaker sections, minority communities, education, housing and micro enterprises," Shettar said at a meeting of chief ministers/finance ministers of five southern states with Chidambaram here.

In contrast to the union finance minister's assessment that the southern states were doing well in credit delivery and better off in financial inclusion and implementation of various central/state welfare schemes, Shettar said the performance of state−run banks in Karnataka during fiscal 2011−12 was not at its best.

"There was decline in credit−to−deposit ratio and ratios for advances to primary sector, agriculture sector and Scheduled Castes and Scheduled Tribes sectors vis−a−vis total advances. These ratios during last fiscal (2011−12) were even lower than in fiscal year 2008−09, which was a tough year in view of the economic slowdown following the global financial crisis," Shettar told Chidambaram.

To buttress his assessment of credit delivery in the state, Shettar said that as against 1.5 million (15 lakh) target, banks issued 8.71 lakh Kisan credit cards in fiscal 2011−12.

"To our surprise, even for current fiscal (2012−13), state−run banks have planned for a lower disbursement of Rs.48,612 crore to the priority sector as compared to credit flow achievement of Rs.55,231 crore in last fiscal (2011−12) though the target was revised to Rs.55,000 crore after deliberations in the state level bankers committee meeting, which means almost nil growth in priority sector advances," Shettar said.

Referring to financial inclusion, the chief minister said implementation of the 'Swabhiman' campaign to provide banking services to all villages with 1,600 and above population was yet to pick up at the ground level.

"The banks' enthusiasm for financial inclusion seems to have been lulled by mere placement of business correspondents in villages with above 2,000 population. Though placement is an essential condition, it is far from sufficient to achieve the goal. The enabling requirements for opening accounts, collecting biometrics for providing services, including disbursement and required infrastructure are yet to be fulfilled," Shettar said.

The chief minister also observed that medium and long−term credit for the farm sector seems to have escaped the attention of the state−run NABARD (National Bank for Agriculture and Rural Development) as its refinance to the state apex cooperative institution was at 10 percent interest.

"Similarly, the support from SIDBI (Small Industries Development Bank of India) to the micro, small and medium enterprises (MSME) has come down to Rs.87 crore in this fiscal (2012−13) from Rs.250 crore in fiscal 2010−11. When the state finance corporations have to compete with banks, it is not practical for them to be dependent on the market for financing needs," Shettar said.

The five southern states are Andhra Pradesh, Karnataka, Kerala, Puducherry and Tamil Nadu.